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Readers hoping to buy Artisan Partners Asset Management Inc. (NYSE:APAM) for its dividend will need to make their move shortly, as the stock is about to trade ex-dividend. Investors can purchase shares before the 11th of February in order to be eligible for this dividend, which will be paid on the 26th of February.
Artisan Partners Asset Management's upcoming dividend is US$1.28 a share, following on from the last 12 months, when the company distributed a total of US$3.39 per share to shareholders. Calculating the last year's worth of payments shows that Artisan Partners Asset Management has a trailing yield of 6.4% on the current share price of $53.25. We love seeing companies pay a dividend, but it's also important to be sure that laying the golden eggs isn't going to kill our golden goose! So we need to check whether the dividend payments are covered, and if earnings are growing.
Dividends are typically paid out of company income, so if a company pays out more than it earned, its dividend is usually at a higher risk of being cut. It paid out 81% of its earnings as dividends last year, which is not unreasonable, but limits reinvestment in the business and leaves the dividend vulnerable to a business downturn. We'd be worried about the risk of a drop in earnings.
Companies that pay out less in dividends than they earn in profits generally have more sustainable dividends. The lower the payout ratio, the more wiggle room the business has before it could be forced to cut the dividend.
Have Earnings And Dividends Been Growing?
Stocks in companies that generate sustainable earnings growth often make the best dividend prospects, as it is easier to lift the dividend when earnings are rising. If earnings decline and the company is forced to cut its dividend, investors could watch the value of their investment go up in smoke. Fortunately for readers, Artisan Partners Asset Management's earnings per share have been growing at 16% a year for the past five years.
The main way most investors will assess a company's dividend prospects is by checking the historical rate of dividend growth. Artisan Partners Asset Management has delivered an average of 8.9% per year annual increase in its dividend, based on the past eight years of dividend payments. It's encouraging to see the company lifting dividends while earnings are growing, suggesting at least some corporate interest in rewarding shareholders.
The Bottom Line
Is Artisan Partners Asset Management worth buying for its dividend? Artisan Partners Asset Management has an acceptable payout ratio and its earnings per share have been improving at a decent rate. Overall, Artisan Partners Asset Management looks like a promising dividend stock in this analysis, and we think it would be worth investigating further.
So while Artisan Partners Asset Management looks good from a dividend perspective, it's always worthwhile being up to date with the risks involved in this stock. To help with this, we've discovered 3 warning signs for Artisan Partners Asset Management that you should be aware of before investing in their shares.
We wouldn't recommend just buying the first dividend stock you see, though. Here's a list of interesting dividend stocks with a greater than 2% yield and an upcoming dividend.
This article by Simply Wall St is general in nature. It does not constitute a recommendation to buy or sell any stock, and does not take account of your objectives, or your financial situation. We aim to bring you long-term focused analysis driven by fundamental data. Note that our analysis may not factor in the latest price-sensitive company announcements or qualitative material. Simply Wall St has no position in any stocks mentioned.
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